Cryptocurrency markets came under pressure on Monday following renewed tensions in the Middle East. Bitcoin briefly fell to around $70,830.76 before recovering to around $71,040, a daily drop of about 3%. Ethereum also fell below $2,000, with risk assets generally declining.
Geopolitical tensions fuel risk aversion
Iran announced it would suspend negotiations with the United States, citing repeated violations of the ceasefire, including the Israeli strikes against Lebanon. Markets are also focused on potential shipping risks in the Strait of Hormuz, a crucial route for global energy transport, putting downward pressure on oil prices and liquidity expectations.
The report also mentioned that Iran retaliated against a US military base after the US took action against Iranian radar and drone facilities. US Treasury Secretary Bessenter stated that the US had seized approximately $1 billion in Iran-related crypto assets. These multiple pieces of news combined led the market to significantly reduce its exposure to highly volatile assets.
The $71,000 mark is attracting attention.
Traders were already closely watching the $71,000 level when Bitcoin fell. A break below this level on the daily chart could see the market test the $70,000 area further. If selling pressure continues, further downside targets could be $68,000, and then the $66,000 to $65,000 range.
On-chain data also shows that current network activity is still lower than the peak of the last bull market. The average daily active Bitcoin addresses are approximately 624,000, down from approximately 1.12 million in May 2021; the average daily new wallets are approximately 278,000, also down from approximately 489,000 at that time.
ETF outflows and increased selling pressure in the spot market
Glassnode data shows that on-chain performance is inconsistent. Bitcoin transaction volume increased by 31% to $4.6 billion, and transaction fee revenue increased by 17%; however, the monthly realized market capitalization growth rate dropped by 57%, approaching zero, indicating that the rate at which new funds are entering the network has slowed significantly.
In the spot market, the cumulative trading volume difference turned negative, indicating stronger selling pressure. Futures open interest remained high at approximately $36.7 billion, but the rising cost of long positions meant that maintaining long positions required a higher price. ETF flows continued to be a source of pressure, with net outflows nearly doubling to $1.3 billion, while trading volume rose to $10.9 billion.
Strategy's small cryptocurrency sale has attracted attention.
The news of Strategy's sale of Bitcoin also garnered attention before and after the market downturn. The company sold 32 Bitcoins between May 26th and 31st, realizing approximately $2.5 million, at an average price of about $77,135 per Bitcoin. The funds were used to pay preferred stock dividends.
This marks Strategy's first Bitcoin sale since December 2022. However, this transaction represents a small portion of its total holdings. The company currently holds 843,706 Bitcoins, with a total purchase cost of approximately $63.87 billion, averaging about $75,699 per Bitcoin.
Some market participants believe that this sale itself may not be enough to change the medium-term trend, but against the backdrop of escalating geopolitical risks and increased ETF outflows, it has still exacerbated market caution.
